Missing the mark: Evaluating the new tax preferences for business income

Ari Glogower, David Kamin

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


The 2017 Tax Legislation introduced two significant new tax preferences for businesses: a reduction in the corporate rate to a flat 21 percent and the 20 percent deduction for pass-through income under Section 199A. Advocates of the legislation justified these preferences in part as a way to encourage new business investment and as a response to international tax competition. However, Congress failed to effectively achieve these goals by appropriately targeting these preferences on an economically coherent category of business income — such as the normal returns to new investment — and by protecting the domestic tax base as they addressed international pressures. Instead, the law extends its tax cuts to a variety of economic returns, including returns to labor of highly-compensated domestic service providers, but only if income is earned in certain forms and in certain sectors of the economy. As a result, the legislation generates substantial new inequity, tax planning opportunities, and administrative challenges for the IRS — none of which was necessary to increase investment and reduce international profit shifting.

Original languageEnglish (US)
Pages (from-to)789-806
Number of pages18
JournalNational Tax Journal
Issue number4
StatePublished - Dec 2018


  • Legislation
  • Tax avoidance
  • Tax law
  • Tax policy

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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